Contract Disputes

Contract Disputes – Representative Matters

Contract disputes are one of the most common types of litigation. From businesses entering into multi-million-dollar service agreements to family members agreeing to fund a small personal loan, the size and complexity of these disputes varies widely. My experience covers the entire range, and has included representing clients in disputes arising out of construction contracts, intellectual property licenses, employment agreements, trust documents, easements, loan agreements, and leases. And while many litigators neglect (rather than nurture) their ability to draft legal documents, we are routinely involved in drafting some of the most important contracts our clients ever sign—settlement agreements. My habit has been to look beyond the standard language that is hastily inserted in such documents, and attempt to simplify and strengthen the contract with an eye toward avoiding further conflicts down the road. I have also litigated some of the settlement agreements that I have drafted, which feels a bit like a court-administered “pop quiz” on how well the settlement agreement was drafted in the first place.

Some of the disputes identified above fall into categories that attorneys usually classify separately (“probate” and “land use,” for example), but they all have one thing in common: they all require careful reading and interpretation of a document that is often overflowing with legalese. These types of disputes can be particularly frustrating for litigants, who feel that the legal system has intruded unnecessarily in an activity (striking a deal and writing it down) that they should be able to handle on their own. With the assistance of a good attorney at the drafting stage, however, these disputes are often predictable, and sometimes avoidable.

Common Challenges

The trouble is that many contracts are drafted during the halcyon days of a relationship—the calm, sunny period in which optimism abounds and litigation is far from anyone’s mind. The negotiation may even be ongoing, as the main points are documented and agreed upon while everyone continues to hash out the details over the course of the relationship. In this environment, it can be difficult to spot sources of future disputes, and even more difficult to be the wet blanket who raises such concerns. Thus, people often gloss over the details of potential problems that might arise down the road.

The origins of a contract dispute may be confusion (people had genuine and differing interpretations of what the document said), lack of imagination (a situation arises that simply wasn’t covered in the document), or desperation (a change in circumstances makes it more difficult for one party to comply, requiring them to adopt, shall we say, “creative” interpretations of what they agreed to originally). It is often useful to sort out which of these events gave rise to the dispute, as it may shape the settlement discussions and how you approach litigation.

How I Can Help

People sign things without reading them. They sign documents that they don’t understand. They sign agreements that contain ambiguity, fail to anticipate obvious problems, or are unfairly one-sided. There are even times when that is a perfectly rational thing to do (indeed, I’ve done all three myself, knowing full well that I was doing it). But for contracts that involve vital services, which arise out of or define important relationships, or which attempt to govern a volatile situation, that kind of efficient indifference yields problems in the long run.

While parties involved in negotiating a contract may not want to appear pessimistic or callous by identifying potential disputes that may arise, litigators lack the “let’s all get along” gene. (Not really. Really we’re very nice people. But we do tend to be less reluctant to point out that people don’t always get along. After all, if they did, we would be out of a job.) So regardless of who is drafting your contract, it is a good idea to have a litigator give it a read at some point. We look at things a bit differently.

For example, one thing I always recommend that people include in their contracts (including settlement agreements) is an alternative dispute resolution (“ADR”) clause. Generally speaking, people are better off trying to resolve their disputes without litigation. Mediation is often the best way to attempt that result, but it can be difficult to propose mediation when you are in the crucible of a brewing dispute; people are either too angry, or too afraid of showing weakness, to talk settlement at an early stage. Having a provision in the contract that requires the parties to attempt mediation before filing suit is an easy way for your calm self (the one negotiating the contract before the trouble started) to reach forward in time to remind your angry self that litigation is a costly distraction. It can also be an easy way to propose mediation to the other side without appearing reluctant to litigate—“We’d love to proceed with a lawsuit, but the contract does require us to give mediation a chance ….”

Sounds like I’m trying to put myself out of a job by having everyone agree up front to try to resolve things without filing a lawsuit? Maybe. Of course, not everyone gets good advice like this when they draft a contract (and not everyone who gets the advice follows it). And some disputes cannot be resolved through mediation at an early stage—there are too many unknowns for a fair settlement to be crafted.

But at any stage in a contract dispute, it is helpful to have someone who can advocate on your behalf, even as to tiny details, without losing sight of the big picture. I care where the commas go (seriously, ask anyone), but there are also times when the contract itself is neither the problem nor the solution. The “four corners of the document” often define what the parties have agreed to, but you cannot allow them to define the limits of how best to resolve a dispute.